Energy economist, Jacques Percebois is professor emeritus at the University of Montpellier and director of the Center for Research in Energy Economics and Law (Creden). He is the author of numerous books, including Electrical Transitionswhich he co-wrote with Jean-Pierre Hansen (Odile Jacob, 2017), and in which he already wondered about the difficulties of the liberalization of the electricity sector initiated in the 1990s.
What was the main motivation for creating a European electricity market?
Originally, the idea was above all to provide the consumer with the lowest possible price. The liberalization of the market should make it possible to accentuate trade and bring down prices. This is a complete change of course after the post-war wave of nationalizations, due to the need to make long-term investments. In France, it was the law of 1946 which, voted with the agreement of the Communists in particular, led to the nationalization of 1,300 companies and the creation of Electricité de France (EDF). The company then resembles a kind of administration with a monopoly of import and export, transport, production and distribution. It was not until 1974 that the nuclear program was accelerated at the time of the oil shocks, with 58 reactors. At that time, the French were very satisfied with EDF. The company has a good rating and symbolizes well-run public service.
Wasn’t the goal also to increase interconnections between countries?
From the end of the 1950s, there was a beginning of interconnection between the countries, and this, in order to allow a “mutual aid” with a spot market, “confidential”, in Basel, Switzerland. That’s what we called “The Laufenburg Star”, in southern Germany, which had three main electricity interconnection branches between Germany, France and Switzerland. Today, 30 countries are interconnected in Europe and even beyond, with Norway and Turkey. This represents 520 million inhabitants.
How did the idea of a large market take hold?
Several reasons will change the game. First of all, a legal reason, with the reminder, in the 1980s, by the European Commission, of the need to respect Article 90 of the Treaty of Rome [1957, débuts du Marché commun]which provides that electricity must be considered a commodity and that competition must apply to everyone.
Manufacturers, for reasons of competitiveness, demanded from that time the removal of barriers to entry into the markets of other countries. The German bosses, among others, who wanted to buy electricity from EDF could not because they had to go through their national monopolies. On this observation, in 1986, Jacques Delors, then President of the European Commission, asked Paolo Cecchini to write a report on the “cost of non-Europe”. He will conclude that, for Europe, the fact of not having a single gas and electricity market represents a shortfall of between 3 and 7% of GDP. The opening of the telecom market to competition in the 1990s and its success, in the sense that it provided access to a host of services in mobile telephony, also paved the way.
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